The search for other types of revenue will accelerate
FOR DECADES Arab oil producers have been caught in a quandary. When prices fall, they pledge to wean their economies off the black stuff. But low prices mean they cannot afford costly reforms. Then output falls, demand climbs and prices begin their inevitable rebound. Treasuries are once again flush, and the pressure to reform disappears.
Privately, some officials now wonder if this cycle is over, making the needed reforms unavoidable. The drop in demand caused by covid-19 sent Brent crude as low as $21 a barrel in 2020. Prices will recover a bit in 2021, perhaps crossing the $50 mark. They will not go much higher, though. Most oil states in the Middle East will still be unable to balance their budgets.